menu
bartleby
search
close search
Hit Return to see all results

Complete the following table and answer the short discussion question.Average Cost(AC)AverageFixed CostTotal CostAverageVariable CostOutput (Q)Total FixedTotal VariableMarginalCost (MC)Cost (TVC)Cost (TFC)(TC)(AFC)(AVC)$50$751$1002$1203$1354$1505$1906$260Given the results from your table, what level of output would you produce to minimize cost per unit? If the price of the product is $20 per unit, how many units of output would youproduce? What is your decision rule?

Question
Complete the following table and answer the short discussion question.
Average Cost
(AC)
Average
Fixed Cost
Total Cost
Average
Variable Cost
Output (Q)
Total Fixed
Total Variable
Marginal
Cost (MC)
Cost (TVC)
Cost (TFC)
(TC)
(AFC)
(AVC)
$50
$75
1
$100
2
$120
3
$135
4
$150
5
$190
6
$260
Given the results from your table, what level of output would you produce to minimize cost per unit? If the price of the product is $20 per unit, how many units of output would you
produce? What is your decision rule?
help_outline

Image Transcriptionclose

Complete the following table and answer the short discussion question. Average Cost (AC) Average Fixed Cost Total Cost Average Variable Cost Output (Q) Total Fixed Total Variable Marginal Cost (MC) Cost (TVC) Cost (TFC) (TC) (AFC) (AVC) $50 $75 1 $100 2 $120 3 $135 4 $150 5 $190 6 $260 Given the results from your table, what level of output would you produce to minimize cost per unit? If the price of the product is $20 per unit, how many units of output would you produce? What is your decision rule?

fullscreen
check_circleAnswer
Step 1

In economics, TFC is the cost incurred when the output production is zero; therefore, here, TFC is $50. However, TC is the sum of both TFC and TVC; therefore, here, TVC = TC – TFC. Also, AFC and AVC are determined by taking the ratio of TVC and TFC with the total output produced respectively, that is, AVC = TVC/Q and AFC = TFC/Q. Furthermore, MC measures the change in the TC when an additional unit of output is produced, i.e., MC = TCn – TCn-1.

Step 2

Consider the above formulas to complete the following table:

Average Average Average
Variable
Output
Total
Total
Total
Marginal
Cost (AC Cost
TC/Q) (MC)
Cost (TC) Fixed
Cost
Variable
Cost
Fixed
Cost
Cost
(AFC)
(TFC)
$50
(TVC)
(AVC)
$50
C
$50
$50
$50
$75
$25
$50
$25
$75
$25
1
2
3
$100
$50
$25
$25
$50
$25
$20
$120
$70
$16.67
$23.33
$40
$135
$50
$85
$12.5
$21.25
$33.75
$30
$15
4
5
$150
$50
$100
$10
$20
$15
$190
$50
$140
$8.33
$23.33
$30
$31.66
$40
6
7
$260
$50
$210
$7.14
$37.14
$70
help_outline

Image Transcriptionclose

Average Average Average Variable Output Total Total Total Marginal Cost (AC Cost TC/Q) (MC) Cost (TC) Fixed Cost Variable Cost Fixed Cost Cost (AFC) (TFC) $50 (TVC) (AVC) $50 C $50 $50 $50 $75 $25 $50 $25 $75 $25 1 2 3 $100 $50 $25 $25 $50 $25 $20 $120 $70 $16.67 $23.33 $40 $135 $50 $85 $12.5 $21.25 $33.75 $30 $15 4 5 $150 $50 $100 $10 $20 $15 $190 $50 $140 $8.33 $23.33 $30 $31.66 $40 6 7 $260 $50 $210 $7.14 $37.14 $70

fullscreen
Step 3

Production cost is minimum when MC = Minimum of AC. Here, in the above case, the gap between AC and MC is minimum at 5...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Our solutions are written by experts, many with advanced degrees, and available 24/7

See Solution
Tagged in

Business

Economics

Related Economics Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: 3. We often work with production technologies that give rise to initially increasing marginal produc...

A: Marginal product of labour is the change in output obtained by hiring one additional labour unit kee...

question_answer

Q: . Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted and both states ar...

A: If Wisconsin spends 1,200 to clean the lake, then the Wisconsin receives benefit of 1,100 and Illino...

question_answer

Q: 1. Which of the following would cause the dynamic DAD (Dynamic Aggregate Demand) curve to shift in (...

A: Since we are entitled to answer only one question per request, we would be answering the first quest...

question_answer

Q: 22. A firm uses labor and capital, (L,K), to produce an output. The hourly cost of labor is $10, and...

A: The isocost line can be written as follows:

question_answer

Q: Why are perfectly competitive markets considered economically efficient?

A: There are several forms of the market that exists in the real world out of which perfect competition...

question_answer

Q: Use the following data for answering Questions 3-6: The Haverford Company is considering three types...

A: For the above question, the correct alternative is B.

question_answer

Q: (Figure: A Money Market) The accompanying figure Equilibrium in the Money Market shows the money mar...

A: Monetary policy: Monetary policy is the tool in the hands of the central bank of a country which reg...

question_answer

Q: 1 – The equation for the change in the capital stock (per worker) is given by the following: (Kt+1/N...

A: Let us first define the Solow model and its implications that give the equation for change in capita...

question_answer

Q: The Johnson Robot Company’s marketing managers estimate that the demand curve for the company’s robo...

A: For the aforementioned question, the correct alternative is c, i.e., $1,500.

Sorry about that. What wasn’t helpful?